FIRST COMMUNITY CORP /SC/ (FCCO) stock intrinsic value fair value estimate & owner earnings analysis

First Community Corporation owns First Community Bank, a community bank based in Lexington, South Carolina. It takes local deposits and lends them to households and small and mid-sized businesses across the Columbia/Midlands area, Aiken, the Upstate (Greenville, Anderson, Pickens) and Augusta, Georgia. It also runs a mortgage business that originates home loans and sells them on, and a wealth management arm. On January 8, 2026 it completed its purchase of Signature Bank of Georgia, an Atlanta-area bank. Signature shareholders received 0.641 First Community shares for each of their shares. Total assets were about $2.37 billion at June 30, 2026, up from $2.06 billion at the end of 2025. Diluted shares rose from about 7.8 million to about 9.5 million, and goodwill doubled to $29.4 million. How we measure earnings. For a bank, reported operating cash flow mostly reflects the timing of mortgages made and sold, so it says little about earning power. We start from net income. We add back depreciation and the small amortization of acquired intangibles. We replace the accounting loan-loss provision with the losses the bank actually took. One-off gains and losses are removed, such as the $1.2 million loss on a 2023 securities sale. We then subtract the spending on branches and equipment needed to stand still. Stock compensation is treated as a real cost: it stays in net income and is never added back. On this basis, owner earnings per share were $1.14 in 2016 and $0.74 in 2017, when branch spending to absorb the Cornerstone acquisition was unusually heavy. They were $1.65 in 2018, $1.43 in 2019, $1.98 in 2020, $2.30 in 2021, $2.05 in 2022, $1.95 in 2023, $2.04 in 2024 and $2.72 in 2025. These figures are somewhat higher than in our previous analysis, which deducted stock compensation twice and charged all branch spending as upkeep. The previous figures are not directly comparable. The earnings level. The years 2020 through 2025 cover a full interest-rate cycle for this bank: near-zero rates, the 2022-2023 squeeze as deposit costs jumped, and the 2025 recovery. The median over those years is about $2.05 a share. The 2025 jump to $2.72 came from net interest income rising to $62.0 million from $52.0 million, as deposit costs fell faster than loan yields and loans grew. We treat part of that jump as rates moving in the bank's favor, not a permanent new level. After the Signature merger closed, the bank earned $0.59 a share in the first quarter of 2026 and $0.80 in the second, $1.39 for the half year against $1.18 a year earlier, even on about 21% more shares. On those two quarters we set the starting level at $2.20 a share, above the cycle median and well below 2025. Owner earnings grew about 33% in 2025. Our year-one figure is below the 2025 level, so we assume no part of that surge repeats. Purchase accounting on the acquired Signature loans will add some interest income for a few years. We treat this as part of the loan yield and do not extrapolate it. Debt. For a bank, deposits, repurchase agreements ($96.5 million) and the $15.0 million of trust-preferred debentures are the raw material of the business. Their interest is already a cost in these earnings, so we subtract no debt. Leverage risk is charged in the bear case instead. Base case, about $41 a share. Earnings start at $2.20 and grow about 4% a year for ten years. The bank has grown loans and deposits steadily in its South Carolina markets for more than a decade, roughly doubling deposits, and we credit only organic growth at or below that record. We charge that growth for the capital it needs: equity equal to about 4% a year of tangible book (roughly $20.60 a share at June 30, 2026) is retained rather than paid out. No future acquisitions are assumed. After year ten we hold earnings flat, with no further growth credited. A long-established local deposit franchise has kept earning through decades of rate cycles, but nothing we can evidence supports growth beyond that. Bear case, about $25 a share. This is one full commercial real estate credit cycle of the 2008-2011 kind. At December 31, 2025, the bank's own filing put non-owner-occupied commercial real estate at about 307% of total risk-based capital, and construction and land loans at about 71%. That is above the 300% level at which regulators apply closer review, and the commercial real estate book grew 37% over the prior three years. Community banks with this profile lost roughly 3% to 4% of loans over that cycle. On about $1.56 billion of loans, that is roughly $45 to $60 million pre-tax, or $4 to $5 a share after tax. Combined with margin compression, earnings fall from $2.20 to about $0.30, $0.10 and $0.60 a share over three years. They then settle at $1.70 with no growth, reflecting permanently higher credit costs and a tougher deposit market. The bank entered this period well capitalized and earns enough each year to absorb losses spread over several years, so we assume no forced capital raise. The bear value sits above tangible book of about $20.60. Even at the reduced $1.70 level, the deposit franchise earns about 8% on its tangible equity. A bank that keeps earning a positive return on its capital through a full cycle is worth more than that capital. Bull case, about $58 a share. The 2025 margin recovery and the Signature merger both hold. Earnings start at $2.75 a share, the rate the first half of 2026 is running at. They then compound at 6% a year on loan growth across the Atlanta, Columbia, Greenville and Augusta markets, again charged for the capital it uses. Margin-of-safety price, $22. We are fairly confident in the earnings level. Credit history is unusually clean, with net recoveries of past losses in seven of the last ten years. Even the trough years of the rate cycle produced about $1.95 a share. The worst plausible outcome is a commercial real estate downturn hitting a loan book concentrated above regulatory guidance while the bank is still absorbing an acquisition in a new state. The structure would likely survive it. The bank is funded by local deposits rather than wholesale money and has no controlling owner. Its dependence on regulators means a bad cycle would halt dividends and growth before it threatened solvency. We are most likely to be wrong in three places: how much of the 2025 margin gain is permanent; whether the Signature integration keeps its deposits and credit quality; and how deep a commercial real estate cycle could cut. If all three went the wrong way, the shares would be worth roughly the bear figure, mid-$20s. At $22, the price is about tangible book for a bank earning about 10% on that price at our starting level. The dividend of about $0.64 a share is roughly 3% of that price during the holding period. The price assumes a three-to-four-year holding period, over which the base case implies a move toward the base value that, with dividends, exceeds 20% a year. In the bear case, the price is still roughly covered by tangible equity and a franchise that keeps earning. That protection, not any single case, is why the margin-of-safety price is $22 and no higher.